tax on unpaid salary

Hi,

I have a question does a company need to pay tds ( income tax) on the unpaid salary of the employees or more specifically if the due amount is being booked as a liability on the balancesheet.

Similiarly, does an employee need to pay tax on the unpaid salary ? if not how doest he pay it when he recieves it in future ?

thanks in adance,
Shikhar

Replies (3)

Tax deduction has to be made for the salary only when it is paid. But in your case, salary is not yet paid, so no need to deduct tax.

In the future, when you receive salary, employer has to remit the tax to the Government within seven days of payment...!!

If the company maintaning their Accounts in Accural Basis then TDS should have deducted on unpaid Salary and the outstanding Salary show in the current liabilities under the head "Outstanding Salary/Salary Payable" along with outstanding TDS on Salary.

INDRA

Indrajit,

Thanks for replying, we are doing it just as you stated.  Is there a work aroud for this.

I mean in our case we end up paying more tax to government than salary to employee !!!

And salary is reflected as a liability in the books.  This becomes a loose-loose situation for the company and employee.

We cannot lower the salary as it would send wrong signals and but we alos dont want to pay tax to govt on upaid salaries.  Is there a workaround ?

thanks in advance,
Shikhar

 

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